To the Editors of the CRIMSON:

In a little over two years the amount of Federal Reserve Notes has increased from $357,239,000 (April 1, 1917) to $2,504,753,000 (August 1, 1919), whereas the amount of gold coin and certificates in circulation has changed from $1,989,152,000 to $728,046,000 in the same period. The entire gold supply of the country has increased from about two billions to about three billions. We see that the Federal Reserve Notes have increased seven times and that the entire quantity of gold has been augumented by only fifty per cent, of its former supply. It is not difficult to understand that this stupendous increase in the volume of currency tends to decrease the market value of the money in the country, and that a greater amount of money is required, than formerly, to purchase a commodity of apparently equivalent value.

The main source of difficulty, however, lies in the distribution of this expanded currency. We observed that the paper money has increased (in quantity) about seven times in the last two years, but it would be ridiculous to assert that every person possesses seven times as much wealth. Many have multiplied their balance by more than seven, but the great majority have not even doubled theirs.

These resulting circumstances are due to the operation of the Federal Reserve Act. By virtue of this act, banks are permitted to make loans practically to the extent that their customers can furnish adequate security. There is no danger of panic by unusual demands on the part of depositors, because the banks can rediscount the notes they hold by taking these to the Federal Reserve Banks of their respective districts. Using these rediscounted notes as collateral, in addition to forty per cent in gold, the Federal Reserve Board may place in circulation new currency, known as Federal Reserve Notes, which constitute at the present time by far the greatest part of the money in daily use.

Hence, provided that one has something to offer as security, it is not a difficult matter to borrow money, which becomes plentiful and correspondingly cheaper. By this process credit is widely extended and the currency becomes inflated. G. Y. SOSNOW 1G.